SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to _________
FAMILY HOME HEALTH SERVICES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA
(STATE OR OTHER JURISDICTION OF INCORPORATION)
000-32887 02-0718322
(COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NO.)
801 WEST ANN ARBOR TRAIL
SUITE 200
PLYMOUTH, MICHIGAN
48170
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
(734) 414-9990
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
----- -----
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes No X
----- -----
Number of shares of Registrant's shares of beneficial interest outstanding as of
September 30, 2005.
26,615,854
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 2005
(unaudited), December 31, 2004 and September 30, 2004
(unaudited) 3
Consolidated Statements of Operations for the three and nine months ended
September 30, 2005 and 2004 4
Consolidated Statements of Cash Flows for the nine months
ended September 30, 2005 and 2004 5
Notes to Consolidated Interim Financial Statements 6-10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10-14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
Item 4. Controls and Procedures 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15
Item 3. Defaults upon Senior Debentures 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits 28
PART I. -- FINANCIAL INFORMATION
FAMILY HOME HEALTH SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
(UNAUDITED) (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
2005 2004 2004
------------- ------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 342,318 $ 209,088 $ 160,213
Accounts receivable 1,652,567 1,782,127 1,523,597
Current portion of advances to affiliates 90,645 200,000 200,000
Prepaid expenses and other current assets 181,018 177,562 24,026
------------- ------------- -------------
TOTAL CURRENT ASSETS 2,266,548 2,368,777 1,907,836
Advances to affiliates, net of current portion -- 141,931 89,019
Net property and equipment 735,397 37,549 98,366
Goodwill 1,250,000 -- --
Other assets 145,685 23,042 11,955
------------- ------------- -------------
TOTAL ASSETS $ 4,397,630 $ 2,571,299 $ 2,107,176
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 259,887 $ 361,748 $ 208,794
Current portion of long-term debt 369,244 46,295 44,561
Current portion of capital lease obligation 44,940 -- --
Accrued compensation 470,978 209,669 160,000
Accrued expenses 345,976 250,000 182,000
Income taxes payable 203,000 -- --
Advances from third-party payors 465,650 281,666 381,234
Advances from related party -- 300,000 300,000
Advances from affiliate 32,684 21,034 21,034
------------- ------------- -------------
TOTAL CURRENT LIABILITIES 2,192,359 1,470,412 1,297,623
Long-term debt, net of current portion 131,193 167,478 180,405
Capital lease obligation, net of current portion 180,337 -- --
------------- ------------- -------------
TOTAL LIABILITIES 2,503,889 1,637,890 1,478,028
STOCKHOLDERS' EQUITY
Common stock, $.001 par value; authorized 50,000,000 shares,
issued and outstanding 26,615,854 shares 26,616 -- --
Additional paid-in capital 599,834 200 200
Retained earnings 1,267,291 933,209 628,948
------------- ------------- -------------
TOTAL STOCKHOLDERS' EQUITY 1,893,741 933,409 629,148
------------- ------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,397,630 $ 2,571,299 $ 2,107,176
============= ============= =============
</Table>
The accompanying notes are an integral part of these interim financial
statements.
FAMILY HOME HEALTH SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<Table>
<Caption>
(UNAUDITED)
------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------------------------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2005 2004 2005 2004
--------------- --------------- --------------- ---------------
REVENUE
Net Medicare patient service revenue $ 3,678,178 $ 2,792,352 $ 11,012,730 $ 7,606,788
Management fee income and other revenues 210,181 108,030 492,144 341,137
--------------- --------------- --------------- ---------------
TOTAL REVENUE 3,888,359 2,900,382 11,504,874 7,947,925
Cost of services sold 1,491,982 1,078,374 4,136,444 2,803,997
--------------- --------------- --------------- ---------------
GROSS PROFIT 2,396,377 1,822,008 7,368,430 5,143,928
Selling, general and administrative expenses 2,571,377 1,616,393 6,771,826 4,050,610
--------------- --------------- --------------- ---------------
OPERATING INCOME (LOSS) (175,000) 205,615 596,604 1,093,318
OTHER INCOME (EXPENSE)
Loss on disposal -- -- -- (347,000)
Interest expense (13,468) (15,091) (33,272) (40,028)
--------------- --------------- --------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES (CREDIT) (188,468) 190,524 563,332 706,290
Income tax expense (credit) (57,000) -- 203,000 --
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (131,468) 190,524 $ 360,332 706,290
=============== ===============
Amount to reflect proforma income tax expense
for change in tax status -- 240,000
--------------- ---------------
PROFORMA NET INCOME AFTER INCOME TAXES FOR
CHANGE IN TAX STATUS $ 190,524 $ 466,290
=============== ===============
BASIC EARNINGS PER SHARE:
Weighted average shares outstanding 26,372,000 26,372,000 26,372,000 26,372,000
NET INCOME (LOSS) PER SHARE $ (0.00) $ 0.01 $ 0.01 $ 0.02
=============== =============== =============== ===============
</Table>
The accompanying notes are an integral part of these interim financial
statements.
FAMILY HOME HEALTH SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<Table>
<Caption>
(UNAUDITED)
------------------------------------
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2005 2004
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 360,332 $ 706,290
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 41,861 24,697
Loss on disposal of software and other assets -- 347,000
Changes in assets and liabilities that provided (used) cash, net of acquisition
Accounts receivable 423,563 (728,005)
Prepaid expenses and other current assets 40,266 14,892
Other assets (115,143) (947)
Accounts payable (243,735) 61,029
Advances from third-party payors 183,984 162,048
Income taxes payable 203,000 --
Accrued expenses and other current liabilities 168,309 86,910
--------------- ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,062,437 673,914
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (245,799) (204,307)
Purchase of subsidiary, net of cash acquired (215,966) --
Advances to affiliates (55,071) (289,019)
--------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES (516,836) (493,326)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions -- 100
Repayments on long-term debt (96,238) (22,034)
Repayments on capital lease (16,133) --
(Repayments on) net advances from related-party (300,000) 175,000
Repayments on net advances from affiliate -- (112,560)
Dividends paid -- (270,000)
--------------- ---------------
NET CASH USED IN FINANCING ACTIVITIES (412,371) (229,494)
--------------- ---------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 133,230 (48,906)
Cash and cash equivalents, beginning of period 209,088 209,119
--------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 342,318 $ 160,213
=============== ===============
</Table>
The accompanying notes are an integral part of these interim financial
statements.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Family Home
Health Services Inc. and, beginning July 1, 2005, its wholly owned subsidiary
FHHS, LLC, a Michigan limited liability company (collectively, the "Company"),
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals with the exception of the loss
referred to in Note 10) considered necessary for a fair presentation have been
included.
Operating results for the nine months ended September 30, 2005 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2005. The Company's business normally experiences some seasonality
in its operations. In general, operating income tends to be lower in the second
and third quarters due to the seasonality of the senior population in the
Company's South Florida markets. For further information, refer to the financial
statements and footnotes included in the Company's Current Report on Form 8-K/A
filed on August 15, 2005 which contained audited financial statements for the
year ended December 31, 2004 and the four months ended December 31, 2003.
NOTE 2 - USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions and select accounting policies that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. The Company's
financial statements include amounts that are based on management's best
estimates and judgments. Actual results could differ from those estimates.
NOTE 3 - RECLASSIFICATION
Certain amounts in the September 30, 2004 unaudited financial statements have
been reclassified to conform to the classifications used in the current period.
NOTE 4 - COMMITMENTS
Employment Agreement: The Company had an employment agreement with a regional
clinical manager that extended through January 2009. The employment agreement
specified a base salary and contained a covenant not-to-compete that extended
through a period up to five years after the expiration or termination of the
employment agreement. Effective May 2005, that agreement was terminated by
mutual consent of both
parties. All future compensation and payments under the resulting termination
agreement have been accrued as of September 30, 2005.
NOTE 5 - LEGAL MATTERS
The Company is involved in litigation and regulatory investigations arising in
the normal course of conducting its business. After consultation with legal
counsel, management estimates that these matters will be resolved without
material adverse effect on the Company's future financial position, results of
operations or cash flows.
NOTE 6 - RECAPITALIZATION
Prior to January 17, 2005, the Company was an inactive public shell company
formerly known as Myocash, Inc. On January 17, 2005, Family Home Health
Services, LLC (the "LLC") completed a reverse acquisition with the Company. The
newly combined company issued an aggregate of 20,000,000 shares of its common
stock to the members of the LLC in exchange for all of the members' outstanding
membership interests in the LLC. Also in connection with the transaction, the
Company's former sole shareholder transferred an aggregate of 4,050,000 shares
of common stock to the former members of the LLC for no additional
consideration. Concurrent with the above transactions, the former members of the
LLC became officers of the Company (the former members of the LLC were appointed
to the Board of Directors of the Company in November 2004). For accounting
purposes, the transaction has been treated as a recapitalization of the Company
with the LLC as the acquirer (i.e., a reverse acquisition). Since the
transaction is considered a recapitalization and not a business combination for
accounting purposes, no pro forma information (other than shown in Note 9) is
presented. If the pro forma information were presented, however, the results
would essentially be the same as reported in Note 9 since Myocash, Inc. had
virtually no activity. The Company expects that its shares will begin trading on
the OTCBB stock exchange during the next six months.
NOTE 7 - RECENTLY ISSUED ACCOUNTING STANDARDS
In April 2005, the Securities and Exchange Commission adopted a new rule that
amends the compliance dates for implementation of the Financial Accounting
Standard Board's ("FASB") Statement of Financial Accounting Standards No. 123
(revised 2004), Share-Based Payment ("SFAS No. 123R"). The Statement requires
that compensation cost relating to share-based payment transactions be
recognized in financial statements and that this cost be measured based on the
fair value of the equity or liability instruments issued. SFAS No. 123R covers a
wide range of share-based compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. The Company will adopt SFAS No. 123R on January
1, 2006 and is currently evaluating the impact the adoption of the standard will
have on the Company's results of operations.
NOTE 8 - COMPUTATIONS OF EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of common
shares outstanding during each period. There are no adjustments required to be
made for purposes of computing diluted earnings per common share since the
Company has no common stock equivalents;
accordingly, only basic earnings per share are disclosed. For the nine months
ended September 30, 2005 and 2004, the weighted average number of shares
outstanding used to calculate earnings per share was 26,372,000 (see Note 9).
NOTE 9 - PRO FORMA FINANCIAL INFORMATION
Assuming the Company was subject to income taxes at a 34% rate and assuming an
equivalent number of common shares outstanding, pro forma operating results for
the nine months ended September 30, 2004 are as follows:
Net income for the nine months ended September 30, 2004 $ 706,290
Pro forma income taxes (240,000)
---------
Pro forma net income $ 466,290
=========
Basic earnings per share:
Weighted average shares outstanding 26,372,000
Pro forma net income per share $ 0.02
=========
NOTE 10 - LOSS ON SOFTWARE AND OTHER ASSETS
In January 2004, the Company executed a Software Purchase Agreement with an
individual whereby the Company acquired a software package and other assets in
exchange for the payment of $100,000 in cash and the assumption of $247,000 in
notes payable. The Company concurrently executed an employment agreement with
the individual (Note 4). During 2004, the Company determined that the software
was not suitable for its intended purpose and other assets had little, if any,
future benefit. Accordingly, the Company wrote off the entire acquisition cost
as a loss which is presented below operating results in the accompanying 2004
interim financial statements.
NOTE 11 - SEGMENT INFORMATION
The Company currently operates in one business segment defined by management as
providing home health care services to Medicare eligible patients.
NOTE 12 - BUSINESS COMBINATION
On July 1, 2005, the Company acquired 100% of the outstanding interest in FHHS,
LLC, a Michigan limited liability company ("FHHS"). FHHS is a provider of home
healthcare services for both Medicare and private pay patients, primarily in
Southeastern Michigan. The acquisition was executed by separate purchase
agreements with each of the two selling groups, one of which is affiliated.
Under the first agreement, the Company paid $800,000 for the interest acquired,
consisting of $100,000 in cash and the issuance of common stock having a value
of $300,000 to each of its two main shareholders and officers in consideration
of the Company's acquisition from them of one-half of the outstanding interest
in FHHS, LLC. The Board of Directors determined, based on similar transactions
in the industry and the Company's current earnings, that the Company's common
stock had a value of $1.64 per share. As such, the Board of Directors authorized
the issuance of 182,927 shares to each seller. In aggregate, the acquisition of
the first 50% interest totaled $200,000 in cash plus 365,854 shares of common
stock having a total value of $600,000 at the date of acquisition.
The remaining 50% interest was acquired from nonaffiliated third parties under a
second purchase agreement totaling $450,000. The purchase price was funded by a
term note with approximately $67,000 due at closing and twelve monthly payments
of $33,308, including interest at 8%, starting September 1, 2005.
The following table summarizes the estimated fair values of the underlying
tangible and intangible assets acquired and the liabilities assumed at the date
of acquisition.
Assets acquired (rounded to the nearest thousand):
Cash and accounts receivable $ 345,000
Other assets 44,000
Intangible assets 10,000
Goodwill 1,250,000
----------
Total assets $1,649,000
Liabilities assumed and accrued (399,000)
----------
Net assets acquired $1,250,000
==========
The following supplemental pro forma information presents the combined operating
results of the Company and FHHS as if the acquisition had occurred at the
beginning of periods presented. The pro forma information is based on the
historical financial statements of the Company and FHHS. Amounts are not
necessarily indicative of the results that may have been obtained had the
combinations been in effect at the beginning of the periods presented or that
may be achieved in the future.
Nine Months Ended September 30,
-------------------------------
2005 2004
----------- ----------
Pro forma net revenues $12,270,000 $8,728,000
Pro forma net income $ 478,000 $ 818,000
Basic earnings per share:
Pro forma net income $ 0.02 $ 0.04
=========== ==========
Weighted average shares outstanding 26,372,000
NOTE 13 - GOODWILL AND INTANGIBLE ASSETS
The Company accounts for its business combinations in accordance with SFAS No.
141, "Business Combinations," which requires that the purchase method of
accounting be applied to all business combinations and addresses the criteria
for initial recognition of intangible assets and goodwill. In accordance with
SFAS No. 142, goodwill and other intangible assets with indefinite lives are not
amortized but are tested for impairment on an annual basis, or more frequently
if circumstances indicate the possibility of impairment. If the carrying value
of goodwill or an intangible asset exceeds its fair value, an impairment loss
shall be recognized.
The Company's goodwill impairment test is conducted at the "reporting unit"
level and compares each reporting unit's fair value to its carrying value. The
Company has determined that its subsidiaries are reporting units under SFAS No.
142. The basis for the measurement of
fair value of each subsidiary is a combination of methods, including but not
limited to discounted cash flows and earnings multiples. For all periods
presented, the Company's tests indicate that no impairment exists and,
accordingly, no loss has been recognized.
NOTE 14 - SUBSEQUENT EVENTS
Share Repurchase
On November 10, 2005, the Company's Board of Directors authorized the repurchase
of 160,000 shares of its outstanding common stock from each of its two principal
shareholders and officers. In the absence of a current trading market, the
purchase price was determined to be $1.64 based on the same valuation analysis
used in connection with the July 1, 2005 business acquisition involving the same
shareholders and officers (Note 12). The aggregate purchase price of the
resulting treasury shares totaled $524,800 and was funded through the issuance
of promissory notes to Messrs. Ruark and Pilkington. The terms of the notes had
not been finalized as of the date of this filing.
Secured Borrowing
On November 10, 2005, the Company obtained a revolving line of credit in the
maximum amount of $1.3 million to support working capital needs. Interest on
borrowings, which are limited to 70% of eligible accounts receivable, will be
charged at the prime rate plus 0.50%. Borrowings will be collateralized by
substantially all assets of the Company and the personal guarantees of the
Company's two principal officers/shareholders.
The Credit Agreement contains customary covenants, including minimum levels of
tangible net worth and a fixed charge coverage ratio.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following section contains statements that are not historical facts and are
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Our actual results may differ
materially from those included in the forward-looking statements. We intend
these forward-looking statements to be covered by the safe-harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and are including this statement for purposes of complying with
those safe-harbor provisions. Forward-looking statements, which are based on our
assumptions and describe future plans, strategies and expectations for
ourselves, are generally identifiable by use of the words "believe," "expect,"
"intend," "anticipate," "estimate," "project," "prospects," or similar
expressions as well as any statements referring to the plan of liquidation or
possibility thereof. Our ability to predict results or the actual effect of our
future plans or strategies is inherently uncertain. Factors which could have a
material adverse affect on our operations and our future prospects on a
consolidated basis include, without limitation, the following:
- our compliance with laws and regulations applicable to health care
providers;
- changes in Medicare reimbursement levels and reimbursement rates from
other third parties;
- our ability to manage our growth;
- our ability to recruit and retain an adequate number of health care
professionals;
- our ability to generate sufficient patient volumes and control the
costs of providing patient services;
- competition for other home heath care providers;
- the effectiveness of our software programs and computer networks;
- general economic and market conditions; and,
- the effects of seasonality on our operations.
These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements.
Additional information concerning us and our business, including additional
factors that could materially affect our financial results, is included herein
and in our other filings with the SEC.
CRITICAL ACCOUNTING POLICIES
The Company has identified the following accounting policies that require
significant judgment. We believe our judgments relating to revenue recognition
and the collectibility of accounts receivable are appropriate.
Revenue recognition under the Prospective Payment System ("PPS") for Medicare
reimbursement is based on a reimbursement rate which varies based on the
severity of the patient's condition, service needs, and certain other factors.
The Company recognizes revenue ratably over the episodic period. Initial
Medicare billings under PPS are initially recognized as deferred revenue and are
subsequently amortized into revenue over the episodic period. Revenue is subject
to adjustment during this period if there are significant changes in the
patient's condition or if minimum visit criteria are not performed during the
episode. As a result, there is at least a reasonable possibility that recorded
estimates will change by a material amount in the near term.
Revenue adjustments result from differences between estimated and actual
reimbursement amounts, an inability to obtain appropriate billing documentation
or authorizations acceptable to the payor, and other reasons unrelated to credit
risk. Revenues are reported net of such adjustments which are deducted from
gross accounts receivable. These revenue adjustments are based on significant
assumptions and judgments that are determined by Company management based on
historical trends and other pertinent factors. Third party settlements resulting
in recoveries are recognized as net revenues in the period in which the funds
are received.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2005 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 2004.
Revenue: For the three months ended September 30, 2005, net patient service
revenue increased $885,000 to $3,680,000, a 32% increase over the same period in
2004. The increase was mainly attributable to a maturation and expansion of our
business development efforts in markets that were started in early 2004. A July
1st business acquisition also contributed $465,000 in net Medicare revenue and
$120,000 in other non-Medicare patient revenue. Those combined efforts led to a
steady
increase in the number of patient episodes that were serviced during the third
quarter of 2005.
Gross Profit: Gross profit margin decreased to 61.6% for the three months ended
September 30, 2005 from 62.8% for the three months ended September 30, 2004.
This decrease was mainly attributable to lower utilization of new salaried
clinical staff that have been added to service the Company's rapid growth.
Selling, General and Administrative Expenses: For the three months ended
September 30, 2005, selling, general and administrative expenses increased
approximately $955,000 to $2,570,000 over the same period in 2004. This 60%
increase was directly attributable to increases in salary and benefits paid to
business development and clinical management staff hired to procure and process
the growing patient census at each of our branches. Additional corporate
resources were also hired to support our growing local operations and to advise
our management team regarding the Company's entrance into the public market.
Operating Income: As a result of the foregoing, operating income decreased over
$380,000, or 185% to a $175,000 operating loss for the three months ended
September 30, 2005 from operating income of $205,000 for the three months ended
September 30, 2004.
Other Income (Expense): For the three months ended September 30, 2005, interest
expense decreased by over 10% compared to the same period in 2004 despite a net
increase in debt of $200,000. The decrease in interest was mainly attributable
to the replacement of prior debt with instruments having more favorable rates.
Income Taxes: Income tax credits for the three months ended September 30, 2005
were $57,000 and consisted of estimated taxable losses at an effective tax rate
of 34%. Prior to January 2005, the Company was treated as a partnership for
federal income tax purposes. Thus, the three months ending September 30, 2004
included no provision for income taxes. See Note 9 to the accompanying interim
consolidated financial statements for the pro forma effect on income taxes
assuming the Company had been subject to income taxes in 2004.
Net Income: Net income decreased $320,000 to a loss of $130,000 in the three
months ended September 30, 2005 from net income of $190,000 during the first
three months of 2004.
The rate of inflation had no material effect on operations for the three months
ended September 30, 2005 or 2004.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2005 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2004.
Revenue: For the nine months ended September 30, 2005, net patient service
revenue increased $3,400,000 to $11,000,000, a 45% increase over the same period
in 2004. The increase was mainly attributable to a maturation and expansion of
our business development efforts in markets that were started in early 2004. A
third quarter acquisition also contributed to this increase. Those combined
efforts led to a
sizeable increase in the number of patient episodes that were serviced during
the first three quarters of 2005.
Gross Profit: Gross profit margin decreased to 64.0% for the nine months ended
September 30, 2005 from 64.7% for the nine months ended September 30, 2004. This
..7% decrease was caused by growth issues described in the aforementioned section
on the results from the three months ended September 30, 2005.
Selling, General and Administrative Expenses: For the nine months ended
September 30, 2005, selling, general and administrative expenses increased
approximately $2,720,000 to $6,770,000 over the same period in 2004. This 67%
increase was directly attributable to increases in salary and benefits paid to
business development and clinical management staff hired to procure and process
the growing patient census at each of our branches. Additional corporate
resources were also hired to support our growing local operations and to advise
our management team regarding the Company's entrance into the public market.
Operating Income: As a result of the foregoing, operating income decreased
nearly $500,000, or 45% to $600,000 for the nine months ended September 30, 2005
from $1,100,000 for the nine months ended September 30, 2004.
Other Income (Expense): Interest expense dropped by nearly 17% during the
comparative periods as the Company's debt structure was reduced through the
repayment of related party advances at the beginning of the second quarter.
Overall debt levels were not increased again until the beginning of the third
quarter. In January 2004, the company acquired software and other assets that
were later determined to be unsuitable for their intended purpose and to possess
little, if any, future benefit. Accordingly, the full acquisition cost of
$347,000 was written off during the quarter ended March 31, 2004 as other
expense.
Income Taxes: Income tax expense for the nine months ended September 30, 2005
was $203,000 and consisted of estimated taxable income at an effective tax rate
of 34%. Prior to January 2005, the Company was treated as a partnership for
federal income tax purposes. Thus, the six months ending September 30, 2004
included no provision for income taxes. See Note 9 to the accompanying interim
financial statements for the pro forma effect on income taxes assuming the
Company had been subject to income taxes in 2004.
Net Income: Net income decreased $350,000 to $360,000 during the nine months
ended September 30, 2005 from 710,000 during the first nine months of 2004.
The rate of inflation had no material effect on operations for the nine months
ended September 30, 2005 or 2004.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $180,000 to approximately $340,000 at
September 30, 2005 from $160,000 at September 30, 2004. At September 30, 2005,
working capital was $74,000, a decrease of approximately $535,000 over September
30, 2004. This decrease was due in large part to acquisition indebtedness that
is all due within the next twelve months (Note #12).
The Company provided net cash from operating activities of $1,060,000 during the
nine months ended September 30, 2005, up from $675,000 for the same period in
2004. The 2005 operating cash resulted from $360,000 in net income during the
period plus approximately $600,000 in positive cash flows from increases in
advances from third-party payors and collections on accounts receivable. As a
whole, changes in all other segments of current assets and liabilities created
$100,000 in operating cash flows during the nine months ended September 30,
2005. The 2004 operating cash resulted principally from $705,000 in net income
during the period. As a whole, changes in other segments of current assets and
liabilities had approximately $30,000 of positive impact on operating cash flows
during the nine months ended September 30, 2004.
Cash outflows from investing activities totaled $515,000 and $495,000,
respectively, for the nine months ended September 30, 2005 and 2004. Current
period activity included approximately $150,000 for the net cash paid for a
third quarter acquisition. Investing activity in both periods consisted of
equipment purchases and advances to affiliates.
Cash used in financing activities totaled $415,000 for the nine months ended
September 30, 2005 and consisted of repayments on related party advances and
payments on long-term debt and capital leases. The cash flow statement for
September 30, 2005 does not reflect a non-cash transaction of approximately
$240,000 in which the Company financed the purchase of phone equipment and
furniture under three capital leases. Net cash used in financing activities
totaled $230,000 for the same nine month period in 2004, consisting of proceeds
from related party advances less cash distributions and repayments of advances
from affiliates.
The Company's working capital needs consist primarily of support for operations
such as salaries and normal vendor payments. The nature of the Company's
business requires bi-weekly payments to healthcare personnel at the time patient
services are rendered. The Company typically receives payments for these
services within a range of 90 days with respect to Medicare programs. The
Company's line of business is not capital intensive with the exception of
expenditures for software and computer equipment. The Company intends to fund
its short-term and long-term liquidity needs through a combination of current
cash balances, cash flows from operations or future financing arrangements such
as traditional credit facilities or capital leases.
OFF-BALANCE SHEET ARRANGEMENTS
The Company had not entered into any material off-balance sheet arrangements as
of September 30, 2005 and 2004.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 30, 2005 and 2004, the Company had no investments that were
subject to material market risk and had no debt or credit facilities that were
interest rate sensitive.
ITEM 4. CONTROLS AND PROCEDURES
We carried out an evaluation, under the supervision and with the participation
of our management, including our President and Chief Executive Officer along
with our Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as of the end of our third
fiscal quarter of 2005 pursuant to Exchange Act Rule 13a-15(b). Based upon that
evaluation, our President and Chief Executive Officer along with our Chief
Financial Officer concluded, subject to the following paragraph, that our
disclosure controls and procedures were effective.
In our Report on Form 10-QSB for the quarter ended March 31, 2005, we disclosed
certain deficiencies with respect to the Company's software program for
recording revenue and accounts receivable. At that time, management implemented
several measures to address those deficiencies, including the implementation of
new software programs and systems that process revenues and accounts receivable.
In addition, the Company expanded the size of its financial staff through the
employment of a controller. As a result of these corrective actions, management
believes that the deficiencies identified have been remediated, enabling our
Chief Executive Officer and Chief Financial Officer to conclude that as of the
date of this report, our disclosure controls and procedures were effective in
timely alerting them to material information to be included in this quarterly
report.
Except for the corrective measures set forth above, there have been no changes
in our internal controls during the third quarter of 2005 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Share Repurchases
On November 10, 2005, the Company's Board of Directors authorized the repurchase
of 160,000 shares of its outstanding common stock from each of Messrs. Kevin
Ruark and James Pilkington, both of whom are directors, officers and significant
shareholders of the Company. In the absence of a current trading market, the
purchase price was determined to be $1.64 based on the same valuation analysis
used in connection with the July 1, 2005 share issuances to the same
shareholders and officers as part of the Company's acquisition from them of
one-half of the outstanding interest in FHHS, LLC, a Michigan limited liability
company. Under that July 1, 2005 agreement, the Company paid $100,000 in cash
and issued common stock having a value of $300,000 to each of the two individual
sellers. The Board of Directors determined, based on similar transactions in the
industry and the Company's current earnings that the Company's common stock had
a value of $1.64 per share. As such, the Board of Directors authorized the
issuance of 182,927 shares to each seller.
The share repurchases from Messrs. Ruark and Pilkington were also approved by
the stockholders upon written consent signed by Messrs.
Ruark and Pilkington, who collectively hold in excess of 51% of the outstanding
shares of the Company.
The aggregate purchase price of the treasury shares resulting from the share
repurchases totaled $524,800 and was funded by the Company through issuance of
promissory notes to Messrs. Ruark and Pilkington. The terms of the notes had not
been finalized as of the date of this filing.
Item 3. Defaults Upon Senior Debentures.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
Secured Revolving Line of Credit
On November 10, 2005, the Company, as the borrower entered into a Loan
Agreement including a Master Revolving Note with Comerica Bank, as the Lender.
The Loan Agreement provides for a $1.3 million secured revolving line of credit
to finance the Company's working capital needs. Availability under the line of
credit is limited to 70% of eligible accounts receivable. Interest is at
Comerica Bank's prime rate as in effect from time to time plus 0.50%. The line
of credit is collateralized by a security interest in all of the Company's
assets pursuant to a Security Agreement dated November 10, 2005.
The line of credit is also secured by the personal guaranties of Kevin R.
Ruark and James Pilkington, directors and executive officers of the Company.
The Loan Agreement contains customary affirmative covenants for this type
of financing arrangement including maintenance of books and records, notice of
adverse events, maintenance of insurance, payment of taxes, and no payments on
any subordinated indebtedness. There are also negative covenants against
acquiring fixed assets in any 12-month period in excess of $500,000, borrowing
money, acting as a guarantor, subordinating any obligations, creating liens,
transferring assets outside the ordinary course of business, making
organizational changes and extending credit other than trade credit.
The Company is also required to meet the following financial covenants:
- A tangible net worth of not less than $900,000 increased by
$500,000 as of the last fiscal quarter of each fiscal year; and
- A fixed charge coverage ratio of not less than 1.25 to 1.00.
The Loan Agreement provides for customary events of default, including
failure to pay principal, interest or fees when due, breach of covenants,
termination of any guaranties of the indebtedness, transfer of a substantial
portion of asset or property commencement of
certain insolvency or receivership events, adverse changes in the business of
the borrower and insecurity on the part of the lender.
Upon the occurrence of an event of default, all outstanding obligations may
be declared immediately due and payable.
The foregoing is a summary of the material terms and conditions of the line
of credit and not a complete discussion of that credit facility. Accordingly,
the foregoing is qualified in its entirety by reference to the full text of the
loan documents attached to this Current Report as Exhibit 10.2, which is
incorporated herein by reference.
Amendments to Bylaws
Effective November 10, 2005, Family Home Health Services, Inc. ("the Company")
Board of Directors amended and restated the Company's Bylaws. The following
table sets forth a brief summary of the material provisions adopted or changed
by the new Bylaws. In addition to the amendments described below, the new Bylaws
include certain changes to (1) comply or be consistent with the Nevada Revised
Statutes ("NRS") and (2) make various technical corrections or non-substantive
changes. The foregoing and the summary that follows are not intended to be
complete, and are qualified in their entirety by reference to the full text of
the Bylaws dated November 10, 2005 included as Exhibit 3.2 hereto and
incorporated herein by reference.
BYLAW
PROVISION PROVISION, AS AMENDED FORMER PROVISION
- -------------- ------------------------------------ ------------------------
Special Except as otherwise provided by law, No comparable provision.
Meetings special meetings of the stockholders
of the corporation shall be held
whenever called by the chairman of
the corporation or by a majority of
the Board of Directors and shall be
called by the president or secretary
upon the order of the Board. No
business shall be acted upon at a
special meeting of stockholders
except as set forth in the notice of
the meeting.
Notice of In the case of an annual meeting, No comparable provision
Shareholder subject to Section 5.3 below, any
Meetings proper business may be presented for
action, except that (a) if a
proposed plan of merger, conversion
or exchange is submitted to a vote,
the notice of the meeting must state
that the purpose, or one of the
purposes, of the meeting is to
consider the plan of merger,
conversion or exchange and must
contain or be accompanied by a copy
or summary of the plan and (b) if a
proposed action creating dissenters'
rights is to be submitted to a vote,
the notice of the meeting must state
that the stockholders are or may be
entitled to assert dissenters'
rights under NRS 92A.300 to 92A.500,
inclusive, and be accompanied by a
copy of those sections.
Advanced Nominations of persons for election No comparable provision.
Notice of to the Board of Directors shall be
Stockholder made pursuant to timely notice in
Nominees writing to the secretary of the
corporation. To be timely, a
stockholder's notice must be
delivered to or mailed and received
at the principal executive offices
of the corporation not less than
forty-five (45) days prior to the
anniversary of the date on which the
corporation first mailed proxy
materials for the prior year's
annual meeting; provided, however,
that if the corporation's annual
meeting of stockholders occurs on a
date more than thirty (30) days
earlier or later than the
anniversary of the corporation's
prior year's annual meeting, then
the corporation's Board of Directors
shall determine a date a reasonable
period prior to the corporation's
annual meeting of stockholders by
which date the stockholder's notice
must be delivered and shall
publicize such date in a filing
pursuant to the Securities Exchange
Act of
1934, as amended, or via press
release. Such publication shall
occur at least ten (10) days prior
to the deadline date for stockholder
nominations set by the Board of
Directors. Such stockholder's notice
shall set forth (a) as to each
person, if any, whom the stockholder
proposes to nominate for election or
re-election as a director: (i) the
name, age, business address and
residence address of such person,
(ii) the principal occupation or
employment of such person, (iii) the
class and number of shares of the
corporation which are beneficially
owned by such person, (iv) any other
information relating to such person
that is required by law to be
disclosed in solicitations of
proxies for election of directors,
and (v) such person's written
consent to being named as a nominee
and to serving as a director if
elected; and (b) as to the
stockholder giving the notice: (i)
the name and address, as they appear
on the corporation's books, of such
stockholder, and (ii) the class and
number of shares of the corporation
which are beneficially owned by such
stockholder, and (iii) a description
of all arrangements or
understandings between such
stockholder and each nominee and any
other person or persons (naming such
person or persons) relating to the
nomination. At the request of the
Board of Directors any person
nominated by the Board for election
as a director shall furnish to the
secretary of the corporation that
information required to be set forth
in the stockholder's notice of
nomination which pertains to
the nominee.
Advance Notice At the annual meeting of the No comparable provision.
of Stockholder stockholders, only such business
Business shall be conducted as shall have
been properly brought before the
meeting. To be properly brought
before an annual meeting, business
must be: (a) as specified in the
notice of meeting (or any supplement
thereto) given by or at the
direction of the Board of Directors,
(b) otherwise properly brought
before the meeting by or at the
direction of the Board of Directors,
or (c) otherwise properly brought
before the meeting by a stockholder.
Business to be brought before an
annual meeting by a stockholder
shall not be considered properly
brought if the stockholder has not
given timely notice thereof in
writing to the secretary of the
corporation. To be timely, a
stockholder's notice must be
delivered to or mailed and received
at the principal executive offices
of the corporation not less than
forty-five (45) days prior to the
anniversary of the date on which the
corporation first mailed proxy
materials for the prior year's
annual meeting; provided, however,
that if the corporation's annual
meeting of stockholders occurs on a
date more than thirty (30) days
earlier or later than the
anniversary of the corporation's
prior year's annual meeting, then
the corporation's Board of Directors
shall determine a date a reasonable
period prior to the corporation's
annual meeting of stockholders by
which date the stockholder's notice
must be delivered and shall
publicize such date in a filing
pursuant to the Securities Exchange
Act of 1934, as amended, or via
press release. Such publication
shall occur at least ten (10) days
prior to the deadline date for
stockholder nominations set by the
Board of Directors. A stockholder's
notice to the secretary shall set
forth as to each matter the
stockholder proposes to bring before
the annual meeting: (i) a brief
description of the business desired
to be brought before the annual
meeting and the reasons for
conducting such business at the
annual meeting, (ii) the name and
address of the stockholder proposing
such business, (iii) the class and
number of shares of the corporation,
which are beneficially owned by the
stockholder, (iv) any material
interest of the stockholder in such
business, and (v) any other
information that is required by law
to be provided by the stockholder in
his or her capacity as a proponent
of a stockholder proposal.
Notwithstanding anything in these
Bylaws to the contrary, no business
shall be conducted at any annual
meeting except in accordance with
the procedures set forth in this
Section. The chairman of the annual
meeting shall, if the facts warrant,
determine and declare at the meeting
that business was not properly
brought before the meeting and in
accordance with the provisions of
this Section, and, if he or she
should so determine, he or she shall
so declare at the meeting that any
such business not properly brought
before the meeting shall not be transacted.
Notwithstanding the foregoing
provisions of this Section 5.3, to
include information with respect to
a stockholder proposal in the proxy
statement and form of proxy for a
stockholders' meeting, stockholders
must provide notice as required by
the regulations promulgated under
the Securities Exchange Act of 1934,
as amended. Nothing in these Bylaws
shall be deemed to affect any rights
of stockholders to request inclusion
of proposals in the corporation
proxy statement pursuant to Rule
14a-8 under the Securities Exchange
Act of 1934, as amended.
Indemnity The corporation shall, to the No comparable provision.
maximum extent and in the manner
permitted by Section 78.751 of the
NRS, indemnify each of its directors
and officers against expenses,
including attorneys' fees,
judgments, fines and amounts paid in
settlement actually and reasonably
incurred in connection with any
threatened, pending or completed
action, suit or proceeding, whether
civil, criminal, administrative or
investigative, except an action by
or in the right of the corporation.
For purposes of this Article, an
"officer" or "director" of the
corporation includes any person (i)
who is or was a director or officer
of the corporation, (ii) is or was
serving at the request of the
corporation as a director or officer
of another corporation, partnership,
joint venture, trust or other
enterprise, or (iii) was a director
or officer of a corporation
which was a predecessor corporation
of the corporation or of another
enterprise at the request of such
predecessor corporation.
The corporation shall, to the
maximum extent permitted by Section
78.751 of the NRS, indemnify any
person who was or is a party or is
threatened to be made a party to any
threatened, pending or completed
action or suit by or in the right of
the corporation to procure a
judgment in its favor by reason of
the fact that he or she is or was a
director or officer of the
corporation, or is or was serving at
the request of the corporation as a
director or officer of another
corporation, partnership, joint
venture, trust or other enterprise,
or was a director or officer of a
corporation which was a predecessor
corporation of the corporation or of
another enterprise at the request of
such predecessor corporation against
expenses, including amounts paid in
settlement and attorneys' fees.
The corporation shall pay the
expenses of officers and directors
incurred in defending a civil or
criminal action, suit or proceeding
as they are incurred and in advance
of the final disposition of the
action, suit or proceeding, upon
receipt of an undertaking by or on
behalf of the director or officer to
repay the amount if it is ultimately
determined by a court of competent
jurisdiction that he or she is not
entitled to be indemnified by the
corporation.
The corporation shall have the
power, to the maximum extent and in
the manner permitted by Section
78.751 of the NRS, to indemnify each
of its employees and agents against
expenses, including attorneys' fees,
judgments, fines and amounts paid in
settlement actually and reasonably
incurred in connection with any
threatened, pending or completed
action, suit or proceeding, whether
civil, criminal, administrative or
investigative, except an action by
or in the right of the corporation.
For purposes of this Article, an
"employee" or "agent" of the
corporation includes any person (i)
who is or was an employee or agent
of the corporation, (ii) is or was
serving at the request of the
corporation as an employee or agent
of another corporation, partnership,
joint venture, trust or other
enterprise, or (iii) was an employee
or agent of a corporation which was
a predecessor corporation of the
corporation or of another enterprise
at the request of such predecessor
corporation.
The corporation shall have the
power, to the maximum extent and in
the manner permitted by Section
78.751 of the NRS, to indemnify any
person who was or is a party or is
threatened to be made a party to any
threatened, pending or completed
action or suit by or in the right of
the corporation to procure a
judgment in its favor by reason of
the fact that he, she or it is or
was an employee or agent of the
corporation, or is or was serving at
the request of the corporation as an
employee or agent of another
corporation, partnership, joint
venture, trust or other enterprise,
or was an employee or agent of a
corporation which was a predecessor
corporation of the corporation or of
another enterprise at the request of
such predecessor corporation against
expenses, including amounts paid in
settlement and attorneys' fees.
The indemnification provided by this
Article shall not be deemed
exclusive of any other rights to
which those seeking indemnification
may be entitled under the Articles
of Incorporation, any Bylaw,
agreement, vote of stockholders or
disinterested directors or
otherwise, both as to action in an
official capacity and as to action
in another capacity while holding
such office.
To the extent that a director,
officer, employee or agent of the
corporation has been successful on
the merits or otherwise in defense
of any action, suit or proceeding
referred to in subsections 1 and 2
of Section 78.751 of the NRS, or in
defense of any claim, issue or
matter therein, he, she or it must
be indemnified by the corporation
against expenses, including
attorneys' fees, actually and
reasonably incurred by him, her or
it in connection with the defense.
The indemnification and advancement
of expenses authorized in or ordered
by a court pursuant to Section
78.751 of the NRS continues for a
person who has ceased to be a
director, officer,
employee or agent and inures to the
benefit of the heirs, executors and
administrators of such a person.
The corporation shall have the
power, to the maximum extent and in
the manner permitted by Section
78.752 of the NRS, to purchase and
maintain insurance or make other
financial arrangements on behalf of
any person who is or was a director,
officer, employee or agent of the
corporation, or is or was serving at
the request of the corporation as a
director, officer, employee or agent
of another corporation, partnership,
joint venture, trust or other
enterprise, or was a director,
officer, employee or agent of a
corporation which was a predecessor
corporation of the corporation or of
another enterprise at the request of
such predecessor corporation for any
liability asserted against him and
liability and expenses incurred by
him in his capacity as a director,
officer, employee or agent, or
arising out of his status as such,
whether or not the corporation has
the authority to indemnify him
against such liability and expenses.
The provisions of this Article 29
relating to indemnification shall
constitute a contract between the
corporation and each of its
directors and officers which may be
modified as to any director or
officer only with that person's
consent or as specifically provided
in this Section. Notwithstanding any
other provision of these Bylaws
relating to their amendment
generally, any repeal or
amendment of this Article 29 which
is adverse to any director or
officer shall apply to such director
or officer only on a prospective
basis and shall not limit the rights
of such director or officer to
indemnification with respect to any
action or failure to act occurring
prior to the time of such repeal or
amendment. Notwithstanding any other
provision of these Bylaws
(including, without limitation,
Article 34 below), no repeal or
amendment of these Bylaws shall
affect any or all of this Article 29
so as to limit or reduce the
indemnification in any manner unless
adopted by (a) the unanimous vote of
the directors of the corporation
then No comparable provision.
serving or (b)by the stockholders as
set forth in Article 34 below;
provided that no such amendment
shall have a retroactive effect
inconsistent with the preceding
sentence.
Item 6. Exhibits.
See Exhibit Index for a description of the documents that are filed as Exhibits
to this report on Form 10-QSB or incorporated by reference herein.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, there under
duly authorized.
FAMILY HOME HEALTH SERVICES INC.
Date: November 14, 2005 /s/ Kevin R. Ruark
----------------------------------------
By: Kevin R. Ruark
Its: Chief Executive Officer and
President
/s/ James Mitchell
----------------------------------------
By: James Mitchell
Its: Chief Financial Officer and
Treasurer
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
3.2 Bylaws of Family Home Health Services, Inc. (as amended and restated)
November 10, 2005
10.1 Loan Agreement between Family Home Health Services, Inc. and Comerica
Bank with Master Revolving Note and Security Agreement all dated
November 10, 2005 (filed herewith).
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.